The Insurance Regulatory and Development Authority of India is preparing to introduce a formal code of conduct governing contracts between health insurance companies and hospitals, according to sources cited by CNBC Awaaz — a move that signals a significant regulatory tightening of one of the most contentious relationships in India’s healthcare ecosystem and has direct implications for listed hospital chains.
The government’s concern centres on what it views as unregulated and often opaque contractual arrangements between insurers and network hospitals — arrangements that critics say have led to inflated billing, selective claim approvals, and practices that ultimately disadvantage policyholders. The forthcoming code of conduct is intended to bring transparency, standardisation and accountability to these bilateral agreements.
The regulatory momentum building behind this move
This is not an isolated signal. IRDAI has been on an increasingly assertive regulatory path through 2025 and into 2026. In March 2026, IRDAI issued fresh health insurance claim rules requiring insurers to settle 100% of genuine claims within 15 calendar days of receipt of the final discharge summary, with automatic approval and interest penalties applying if the deadline is missed. IRDAI’s vice-chairperson stated at a press briefing that hospitals misusing cashless rules under Section 41 of the Insurance Act would be stripped of their network status within 15 days.
Under new 2026 rules, insurers are now required to approve final cashless authorisations within three hours of receiving bills at discharge, and the Cashless Everywhere initiative allows policyholders to receive cashless treatment at any hospital in India regardless of whether it is in the insurer’s network.
The proposed code of conduct goes a step further — from regulating insurer behaviour to directly regulating the terms on which hospitals and insurers can contract with each other.
What the code of conduct could cover
While the specific provisions have not yet been formally announced, the regulatory direction suggests the code is likely to address standardised billing practices for network hospitals, restrictions on hospitals demanding cash payments after cashless authorisation, transparency requirements on package pricing and itemised billing, limits on discretionary exclusions that hospitals can impose on insured patients, and enforcement mechanisms including potential delisting from insurance networks for non-compliant hospitals.
The stock market impact
Hospital stocks are sensitive to any regulatory action that could standardise or cap pricing on insurance-linked procedures — a meaningful and growing revenue stream for listed hospital chains including Apollo Hospitals, Fortis Healthcare, Max Healthcare, Narayana Hrudayalaya and others. Insurance-funded patients typically carry higher average revenue per occupied bed than cash-paying patients, and any compression in realisation rates from tighter bilateral contracts could weigh on near-term margins.
However, the longer-term read is more nuanced. Greater standardisation and transparency in insurance-hospital contracts could accelerate cashless adoption and increase the overall insured patient pool — a volume tailwind that could offset any near-term pricing pressure for hospitals with strong brand equity and occupancy rates.
The precise contours of the code of conduct, and its implementation timeline, will determine the magnitude of the impact. Markets will be watching IRDAI’s formal announcement closely.